Celsius Coal predicts strong outlook for 2014

Celsius Coal chairman, Alex Molyneux, has said in a company interview that the outlook for the company’s Uzgen Basin metallurgical coal project in the Kyrgyz Republic is both strong and promising.

The company is moving towards a start-up of its Uzgen Basin coal project, which is comprised of three prospective metallurgical coal tenements: Kargasha, Kokkia and Min Teke.

Molyneux said that 2013 had been a successful year for the company, with positive results from an exploration field session with some record drill intersections. He said that while results were promising, the next task for the company was to assess the analytical data, translate it into an updated JORC resource statement and look at what it means in mineable tonnes, and thereby discern whether the best approach for mining at the project would be opencast, underground or by auger.

The company is aiming to complete the first stage of laboratory testing by the second week of December, which would be followed by a second phase of coke strength and reaction (CSR) testing, which should be completed by late February 2014. Molyneux said he expects CSR testing “will show a good quality of metallurgical coal.”

Molyneux explained the company had set itself an “aggressive” schedule, and would be looking at using auger or high wall mining equipment for a quick startup: targeting saleable production of coal for 2015. “We are looking very hard at this mining method not only because of its ease of startup but its low cost and its broader application. We will also be looking at a number of opencast scenarious, which also fit a 105 timeline,” Molyneux said.

The company was pleased to announce the completion of its 2013 exploration programme. The Kargasha tenement was seen as “promising”, while the company also holds high hopes for the Kokkia side of the Uzgen Basin coal deposit, because of its potential to deliver higher value coal. Molyneux said that “The drilling in Karhasha has gone pretty well, as expected, but Kokkia has delivered some exciting results.”

The Uzgen Basin coal project has a JORC resource of 255 million t, which Molyneux said was a very large resource for a low-ash contiguous metallurgical coal resource. Because of the size of the resource, Molyneux said that the priority for 2013 “was filling the gaps in our knowledge by focusing more work where we considered the best value resource [was located] and where it would be best to start mining.” He also said that he expected the resource to grow materially when the company published its next project update.

A number of adits had been excavated into the project area during the soviet era. However, since then the Kokkia area had not been drilled, so Molyneux explained that assessing coal quality in that tenement was a priority for Celsius Coal. The chairman said he expected to see data on the Kokkia area in the next few weeks.

Chinese interest

The company is also set to release results of some larger diameter PQ core holes that were drilled earlier in 2013, so that they could provide large samples for CSR. “We have been talking to a number of potential Chinese customers and they have indicated that [CSR results] is one of the important tests they would like to see,” said Molyneux.

Molyneux revealed that, looking ahead to 2014, Celsius Coal would be targeting Chinese coke plants. “All the potential consumers we have spoen to have said that if we can get coal to the [Chinese] border, they are really keen to test it in their coke plants,” he said.

The chairman explained that the key market in Xinjiang is for high-quality hard metallurgical coal. Companies in Xinjian currently operate using local blending coals with a high-quality metallurgical coal brought in from eastern China – meaning that this coal must be transported great distances, sometimes as much as 3000 km. Coke plants in the region are therefore paying a premium for the material in transportation costs, which Molyneux said “in some cased are probably in excess of US$ 200/t.” Transport from Kokkia to Kashgar is around 500 km, and around 1500 km to Urumqi.

Infrastructure report

The company has previously stated it will benefit from useful access to largely developed infrastructure that is already in place in the vicinity of the operation. Besides the TransAsia railway, there have been recent announcements of a new north to south highway that would link Bishkek in the north to Jalal-abad in the south.

The highway would be of particular use to Celsius Coal, Molyneux said: “Each of the three optional routes [for the highway] provide some advantage to our project. One of them provides a major link from Kokkia to Touragart on the Chinese border. Only 2 weeks ago I surveyed the route – there is one tough section of less than 50 km, but the rest is very straight forward. The Chinese have clearly invested a lot into local infrastructure and seem to be intent on continuing to do this.”

Future outlook

Molyneux explained that the aim now for the company was to define an initial 10 – 20 million t area for first mining. After the company released details of production volumes in the current programme, it would then look to build a significant project.

2013 – 2014 mine planning is set to commence upon completion of mine modelling work. The operation will likely be initially quite profitable, and will increase from there.

“All the noise has been about the Kargasha/Kokkia metallurgical coal project and rightly so because it is a very exciting and prospective project,” Molyneux said. “We expect 2014 to be an exciting year for shareholders as we de-risk the Uzgen Basin coal project and add to its value.”